Transcat further expands its higher margin rental business with the acquisition of Becnel Rental Tools, Inc.
- Transcat acquires Becnel Rental Tools, Inc. for $50 million.
- Deal includes $32.5 million in stock and $17.5 million in cash.
- Acquired EBITDA for the deal is approximately $5.8 million.
- Becnel operates in a niche part of the oil and gas industry.
- Strong customer relationships and market stability in the highly regulated markets.
- Synergies with Transcat's calibration services and distribution products.
- Strategic fit for Transcat with opportunities for profit enhancement and lead generation.
- None.
Insights
The acquisition of Becnel Rental Tools, LLC by Transcat, Inc. represents a strategic move in expanding its high-margin rental division. The $50 million deal, with mixed payment methods of both stock and cash, suggests confidence in Transcat's equity value and liquidity management. The purchase amount and the mix of cash and stock used to finance it could reflect Transcat's balance sheet strength and forecasted synergies. For investors, the key metric here is the EBITDA figure cited at approximately $5.8 million, which implies a purchase price multiple of around 8.6x EBITDA—a figure that investors will compare against sector averages and historical transactions.
From a financial standpoint, the focus on boosting Gross Margins and EBITDA Margins is critical, since margin expansion usually translates into better financial health and stock performance. This is particularly pertinent for stakeholders eyeing not just growth, but profitable growth. Financially savvy stakeholders will also pay close attention to the 'customary holdback provisions', which could impact the final cost of the transaction.
Transcat's acquisition mirrors a broader industry trend where companies are diversifying into niche markets to achieve higher margins. Becnel, operating in a niche segment of the oil and gas industry providing tools for decommissioning and maintenance of oil wells, represents a stable customer base largely insulated from market volatility. The strategic retention of Becnel's leadership and staff assures continuity and expertise in a specialized field, which is vital for customer retention and potentially advantageous for seamless integration into Transcat's operations.
Moreover, the potential for cross-selling calibration services and distribution products could unlock new revenue streams for Transcat. It's essential to examine how these cross-selling strategies will be executed in a highly regulated market and whether Transcat can effectively leverage Becnel's established customer relationships.
Becnel's specialization in a sector poised for growth due to the increasing need for oil well decommissioning positions Transcat advantageously. The reference to tens of thousands of wells slated for decommissioning in the coming years indicates a sustainable demand for services. However, investors will be scrutinizing the integration process and how Transcat capitalizes on this opportunity, as well as the potential risks related to changes in regulatory environments and the future state of the oil industry.
Given the current focus on energy transition and sustainability, it's pertinent to assess how Transcat will navigate the balance between investing in traditional energy infrastructure and adapting to a potentially shrinking market as the world shifts towards renewable energy sources.
Founded in 2012, Becnel is an ISO 9001:2015 certified provider of rental tools and services primarily utilized in the decommissioning and maintenance of oil wells. The company’s management team has vast experience operating and servicing customers in these highly regulated end markets. The existing staff and leadership team, led by current Becnel President Jason Becnel, will remain in place to strategically drive the business and service customers’ needs.
“Becnel is a well-run business, with great leadership and significant industry experience in the rental of equipment used in the highly regulated end markets associated with decommissioning and maintenance of oil wells. They have demonstrated the ability to scale in support of the growing number of wells that are in need of decommissioning, and we believe that the resources and expertise that Transcat brings to the table, will position Becnel well for continued growth to take advantage of the tens of thousands of wells targeted to be decommissioned in the next 10 to 15 years and beyond, as well as future service expansion opportunities,” according to Lee Rudow, President and Chief Executive Officer. “Becnel operates in a niche part of the oil and gas industry, and we believe the business is largely isolated from the inherent market volatility. Their customer relationships are very strong and as a result, we believe that the highly regulated markets that Becnel serves, will provide significant opportunity for cross-selling of Transcat’s calibration services, as well as our core distribution products.”
Mr. Rudow added, “We continue to find the rental business very attractive and view Becnel as a great addition to our rental portfolio. In addition, within their current business model, Becnel has an attractive service revenue component that works hand in hand with their equipment rentals. Similar to the rest of our rental portfolio, this business performs very well financially and will provide expansion to our overall Gross Margins and EBITDA Margins for both our Service and Distribution segments. The total acquired EBITDA for this deal is approximately
“This rental business is different than our existing rental businesses in terms of the nature of the equipment being rented but is very consistent in the opportunities it provides to the overall Transcat business, which are expansion of our offerings, profit/margin enhancement, cross-selling opportunities, and lead generation for our Services business. As a result, we see Becnel as a great strategic fit for Transcat.”
ABOUT TRANSCAT
Transcat, Inc. is a leading provider of accredited calibration, reliability, maintenance optimization, quality and compliance, validation, Computerized Maintenance Management System (CMMS), and pipette services. The Company is focused on providing best-in-class services and products to highly regulated industries, particularly the Life Science industry, which includes pharmaceutical, biotechnology, medical device, and other FDA-regulated businesses, as well as aerospace and defense, and energy and utilities. Transcat provides periodic on-site services, mobile calibration services, pickup and delivery, in-house services at its 27 Calibration Service Centers strategically located across
Transcat also operates as a leading value-added distributor that markets, sells and rents new and used national and proprietary brand instruments to customers primarily in
Transcat’s strategy is to leverage its strong brand and unique value proposition that includes its comprehensive instrument service capabilities, Cost, Control and Optimizations services, and leading distribution platform to drive organic sales growth. The Company will also look to expand its addressable calibration market through acquisitions and capability investments to further realize the inherent leverage of its business model. More information about Transcat can be found at: Transcat.com.
Safe Harbor Statement
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact and thus are subject to risks, uncertainties and assumptions. Forward-looking statements are identified by words such as “expects,” “estimates,” “projects,” “anticipates,” “believes,” “could,” “plans,” “aims” and other similar words. All statements addressing operating performance, events or developments that Transcat, Inc. expects or anticipates will occur in the future, including but not limited to statements relating to anticipated revenue, profit margins, the Company’s response to the coronavirus (COVID-19) pandemic, the commercialization of software projects, sales operations, capital expenditures, cash flows, operating income, growth strategy, segment growth, potential acquisitions, integration of acquired businesses, market position, customer preferences, outlook and changes in market conditions in the industries in which Transcat operates are forward-looking statements. Forward-looking statements should be evaluated in light of important risk factors and uncertainties. These risk factors and uncertainties include those more fully described in Transcat’s Annual Report and Quarterly Reports filed with the Securities and Exchange Commission, including under the heading entitled “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of the Company’s underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on the Company’s forward-looking statements, which speak only as of the date they are made. Except as required by law, the Company disclaims any obligation to update, correct or publicly announce any revisions to any of the forward-looking statements contained in this news release, whether as the result of new information, future events or otherwise.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240415324301/en/
For more information, contact:
Linda Reynolds
Executive Assistant
35 Vantage Point Drive
Phone: 585.866.1969
Email: linda.reynolds@transcat.com
Source: Transcat, Inc.
FAQ
What is the acquisition price for Becnel Rental Tools, Inc.?
When was the acquisition of Becnel Rental Tools, Inc. effective?
What is the breakdown of the payment for the acquisition?
What is the acquired EBITDA for the deal?
What industry does Becnel Rental Tools, Inc. operate in?
What opportunities does the acquisition of Becnel Rental Tools, Inc. present for Transcat?
